State Treasurer Curtis Loftis is trying to take advantage of the Great Recession by refinancing state debt, saving taxpayers millions of dollars in the process.
With interest rates at historic lows, Loftis’ office has refinanced portions of the state’s debt over the past two years, saving taxpayers $72 million.
And he’s looking to do more deals. “We go through these (state) bonds on a regular basis, looking for opportunities.”
States across the country are trying to refinance their debt.
Washington state Treasurer James McIntire, for instance, has saved his state about $390 million so far with refinancing. With interest rates low, any state with a good credit rating and debt that is eligible to be refinanced can “save your taxpayers a boatload of money,” according to Wolfgang Opitz, Washington’s assistant state treasurer.
South Carolina has all of the factors necessary — particularly a good credit rating. Moody’s and Fitch, two of the largest credit-rating agencies, recently reaffirmed South Carolina’s AAA rating — the highest possible. A third ratings agency, Standard & Poor’s, rates the state a notch lower, AA-plus.
Low interest rates also have caught the attention of state lawmakers, who are considering borrowing up to $120 million to dredge the Charleston port. It would be the first time South Carolina has borrowed money for a construction project since 2000. However, that proposal has divided lawmakers. Tea Party-affiliated legislators oppose the bill, saying they don’t want to increase the state’s debt.
Kate Marshall, treasurer of Nevada and president of the National Association of State Treasurers, says lower interest rates are a blessing and a curse. “When we invest our money, we are not making a lot, but it is very, very good for our debt because we are not having to pay a lot,” she said. “Every coin has two sides.”
While low interest rates fuel refinancing, the Great Recession also has prompted Loftis to review and rebid some state contracts. His office is reviewing bids to manage the state’s Future Scholar 529 College Savings Plan, a move that Loftis says could reduce administrative fees for that fund’s 77,000 account holders. Loftis also is reviewing applications to be the state’s custodial bank, a holding tank for state assets.
“The financial services are hungry for new business, and we’re hungry for new services,” Loftis said. “We need each other.”